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By XE Market Analysis December 18, 2018 7:35 am
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    XE Market Analysis: North America - Dec 18, 2018

    The Dollar came under broad pressure during the London AM session. Market narratives are talking about position trimming into the Fed's expected rate hike, which is also widely expected to be accompanied with dovish-leaning guidance. This view appears to have helped stock markets find some stability following the hefty losses Wall Street saw yesterday. S&P 500 futures were showing a gain of 0.4% in overnight trading. EUR-USD, meanwhile, punched out a one-week high at 1.1402. The Euro itself traded more mixed versus other currencies, with a much weaker than expected German Ifo report having had little net impact. USD-JPY printed a nine-day low at 112.29. Cable posted an eight-day high at 1.2708, putting some further distance in from last week's 20-month nadir at 1.2476. The Pound also manged to post moderate gains versus the Euro and Yen today, reflective of a heavily net short market trimming positions into the Christmas holiday period. The UK's parliamentary vote on the Withdrawal Agreement and outline for a future relationship has been confirmed to be in the week of January 14, before the legislated deadline of January 21. Our best guess remains that Parliament will vote down the Brexit deal and, of all the possible scenarios at that point, we reckon that a new EU referendum will be the path of least resistance.

    [EUR, USD]
    EUR-USD has punched out a one-week high at 1.1402, which has mostly been a product of dollar weakness during the London AM session, with the euro trading more mixed versus other currencies. Markets have been trimming positions into the expected Fed hike tomorrow, which is also anticipated to be accompanied by dovish spin in the central bank's policy guidance. A much weaker than expected German Ifo release had little impact. EUR-USD has been in a bear trend since April, although downside momentum has been abating in recent weeks. We still take an overall bearish view of the pairing based on the expected relative strength of the Eurozone and U.S. economies. Trend resistance, draw from wave highs seen over the last six weeks, comes in at 1.1408-10. Support comes in at 1.1360-62.

    [USD, JPY]
    USD-JPY extended losses in printing a nine-day low at 112.29. The latest phase has been driven by broad Dollar weakness, which taken over from what was a phase of Yen strength in Tokyo. Market narratives are talking about position trimming into the Fed's expected rate hike, which is also widely expected to be accompanied with dovish-leaning guidance. This view appears to have helped stock markets find some stability. While European bourses are mixed. S&P 500 futures are showing a 0.3% gain, which follows the cash version of the index closing with a 2.1% loss on Wall Street yesterday. Concerns about slowing global growth remain, however. USD-JPY has support at 112.23-25, and resistance at 113.00. Bigger picture, the pairing has been oscillating in a broadly sideways range centred around 112.50-113.00 for over two months now. More of the same looks likely.

    [GBP, USD]
    Cable has lifted amid a softer Dollar environment, printing an eight-day high at 1.2708, putting some further distance in from last week's 20-month nadir at 1.2476. The Pound has also manged to post moderate gains versus the Euro and Yen today, reflect of a heavily net short market trimming positions into the Christmas holiday period. As for Brexit, political drama has been continuing on an almost daily basis. The leader of the opposition, Jeremy Corbyn, yesterday called for a confidence vote on the government, though this doesn't have sufficient parliamentary support with Northern Ireland's DUP and the Eurosceptic members of the prime minister's Conservative party declaring that they won't back it. Prime Minister May's cabinet is meeting today, reportedly to discuss no-deal contingency plans. May has been stoically, some would misguidedly, plugging away in her efforts to sweeten the Brexit deal, but it's clear there won't be any renegotiation by the EU, while support for a "Final Say" referendum on EU membership has been growing. The parliamentary vote on the Withdrawal Agreement and outline for a future relationship will take place in the week of January 14, before the legislated deadline of January 21. Our best guess remains that Parliament will vote down the Brexit deal and, of all the possible scenarios at that point, we reckon that a new EU referendum will be the path of least resistance.

    [USD, CHF]
    EUR-CHF has settled in the upper 1.1200s after failing to sustained a brief move above 1.1300 last week. The cross remains comfortably above the two-and-a-half month low seen last Tuesday at 1.1225. The SNB remained firmly on hold at its quarterly policy meeting last week, continuing to rely on the combination of negative interest rates and the threat of intervention to limit appreciation in the currency in times of heightened uncertainty about the global outlook.

    [USD, CAD]
    USD-CAD has remained buoyant but below the 18-month high at 1.3445 that was printed on December 6. Fresh declines in oil prices, which has seen the WTI crude benchmark hit a fresh 15-month low under $49.0, should maintain pressure on the Canadian Dollar. Ee continue to take a bullish view. The pair has resistance at 1.3445-50, and support at 1.3320-21.

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